Names In the News

EPA: End of Prosecution Agency

The Environmental Protection Agency’s pursuit of criminal cases against polluters has dropped off sharply during the Bush administration, with the number of prosecutions, new investigations and total convictions all down by more than a third, the Washington Post reported in October.

The number of civil lawsuits filed against defendants who refuse to settle environmental cases was down nearly 70 percent between fiscal years 2002 and 2006, compared with a four-year period in the late 1990s, according to those same statistics.

With less enforcement, “you don’t get cleanup, and you don’t get deterrence,” says Eric Schaeffer, who resigned as director of the EPA’s Office of Civil Enforcement in 2002 to protest the administration’s approach to enforcement and now heads the Environmental Integrity Project, a watchdog group.

The slower pace of enforcement mirrors a decline in resources for pursuing environmental wrongdoing.

The EPA now employs 172 investigators in its Criminal Investigation Division, below the minimum of 200 agents required by the 1990 Pollution Prevention Act, signed by the first President Bush, the Post reported.

The actual number of investigators available at any time is even smaller, agents say, because they sometimes are diverted to other duties, such as service on EPA Administrator Stephen Johnson’s eight-person security detail.

Johnson, President Bush’s chief environmental regulator, foreshadowed a less confrontational approach towards enforcement when he served as the EPA’s top deputy in late 2004. “The days of the guns and badges are over,” Johnson told a group of farm producers in Georgia the day before Bush won reelection, according to a news account of the speech.

Administration officials said they are not ignoring the environment but are focusing attention on major cases that secure more convictions against bigger players, the Post reported.

95% Off! With A Catch

Merck will pay $670 million to settle federal and state charges that it violated the False claims Act by engaging in nominal pricing fraud.

Merck said in September that it was setting aside the $670 million in connection with the anticipated resolution of investigations, the first of which was disclosed beginning in 2002, of civil claims by federal and state authorities relating to past marketing and selling activities, including nominal pricing programs and samples.

The settlement will be the first in a series of federal cases brought against major pharmaceutical companies who engaged in nominal pricing fraud.

The major drug companies have allegedly been approaching hospitals with an irresistible offer: a drug company would provide the hospital with its statin drug, for example, at a nominal cost – a 95 percent discount. In exchange, the hospital would agree to fill 95 percent of its statin prescriptions with that company’s drug.

How does the drug company make any money by giving hospitals a 95 percent discount?

“The same way a heroin dealer makes money,” says Patrick Burns of Taxpayers Against Fraud. “You are not going to be at the hospital for long. But you will be on a statin for the rest of your life. Once they get you on the ramp, it’s very hard to get you off.”

Burns says that while Merck will be the first case out of the chute, it will not be the last. He anticipates billions of dollars in recoveries from the drug companies for this category of health care fraud.

The Rubber Cartel

The European Commission in December imposed a total of $356 million in fines on Bayer, Denka, DuPont, Dow, ENI, and Tosoh for participating in a cartel for chloroprene rubber in the European Union.

Between 1993 and 2002, the Commission found, these companies shared the market and fixed prices for chloroprene rubber, which is used for rubber components in a range of industrial products, as latex for the production of diving equipment, condoms and the inner soles of shoes, and as adhesive.

The fine against Italy’s ENI was increased by 60 percent because it had been fined previously for similar behavior.

The fine against Bayer would have been increased by 50 percent for the same reason, but Bayer was the first company to come forward with information about the cartel. Under the Commission’s 2002 Leniency Notice which aims to promote company self-reporting of violations of competition rules, Bayer received full immunity from fines. Bayer would have been fined $295 million.

“It is particularly disappointing that the rubber industry has still not learned its lessons about avoiding cartels.” Says Competition Commissioner Neelie Kroes. “I find it very difficult to understand how shareholders and board members can tolerate such illegal behavior.”

From at least 1993 to 2002, the Commission found, the producers of Chloroprene rubber operated a cartel in which they agreed on each other’s market shares and set prices. The companies held regular meetings to discus prices, exchange sensitive commercial information, discuss specific clients and to follow-up the implementation of their illegal agreements.